Imagine managing a family fortune of HK$240 million or more and paying zero profits tax on your investment income. This isn’t a theoretical scenario—it’s the reality for eligible family offices operating in Hong Kong under the groundbreaking Family Investment Holding Vehicle (FIHV) regime. With over 2,700 single family offices already established in Hong Kong, the city has emerged as Asia’s premier wealth management hub, offering ultra-high-net-worth families unprecedented tax efficiency combined with strategic access to Greater China markets and global investment opportunities.

Hong Kong’s Family Office Revolution: Why Now?

Hong Kong’s transformation into a family office powerhouse is no accident. The government’s strategic push began with the March 2023 Policy Statement on Developing Family Office Businesses, followed by the formal introduction of the FIHV tax concession regime in May 2023. This comprehensive approach has yielded remarkable results: a market study commissioned by Invest Hong Kong revealed over 2,700 single family offices operating in the jurisdiction, with more than half managing assets exceeding US$50 million.

The Legislative Framework: Inland Revenue (Amendment) Ordinance 2023

The legal foundation for Hong Kong’s family office tax concessions is the Inland Revenue (Amendment) (Tax Concessions for Family-owned Investment Holding Vehicles) Ordinance 2023, which came into operation on May 19, 2023. This legislation amended the Inland Revenue Ordinance to provide profits tax concessions for eligible FIHVs managed by eligible Single Family Offices (SFOs) in Hong Kong, and for Family-owned Special Purpose Entities (FSPEs).

The Five Pillars of FIHV Eligibility

1. Family Ownership Structure

Members of the single family must hold, directly or indirectly, at least 95% of the beneficial interest in both the FIHV and the SFO. This high threshold ensures the regime benefits genuine family wealth structures rather than commercial investment funds. The requirement can be reduced to 75% if at least 20% of the remaining beneficial interest is held by a qualifying charitable institution.

2. Minimum Asset Threshold: HK$240 Million

The assets under management must include at least HK$240 million of “Schedule 16C” specified assets. These include securities, private company shares, futures contracts, foreign exchange contracts, deposits, exchange-traded commodities, foreign currencies, and OTC derivative products.

Crucially, the regime includes a three-year lookback mechanism: if the aggregate NAV falls below the HK$240 million threshold in a given year, the requirement is still satisfied if the NAV in either of the two immediately preceding years met the minimum. This protects against temporary market fluctuations.

3. Hong Kong Management and Control

The FIHV must be normally managed or controlled in Hong Kong during the basis period for the year of assessment. This ensures genuine economic substance and prevents purely nominal structures designed solely for tax avoidance. Management and control is demonstrated through the FIHV being managed by an eligible SFO that carries out or arranges the FIHV’s qualifying transactions in Hong Kong.

4. Substantial Activities Requirement

The FIHV must carry out its core income-generating activities (CIGAs) in Hong Kong and meet specific thresholds:

• Employment: At least two full-time employees in Hong Kong who carry out relevant activities and possess necessary qualifications
• Operating Expenditure: At least HK$2 million annual operating expenditure incurred in Hong Kong for carrying out relevant activities

5. Qualifying Transactions Framework

Only assessable profits arising from qualifying transactions and incidental transactions are eligible for the 0% concessionary tax rate. Qualifying transactions are those carried out in Hong Kong by or through an eligible SFO involving specified assets under Schedule 16C.

Incidental transactions are permitted subject to a 5% threshold: the FIHV’s trading receipts from incidental transactions must not exceed 5% of total trading receipts from both qualifying and incidental transactions.

Tax Treatment: Complete Profits Tax Exemption

Qualifying FIHVs benefit from a 0% concessionary profits tax rate on assessable profits earned from qualifying transactions and incidental transactions. This represents complete exemption from Hong Kong’s standard corporate profits tax rates:

November 2024 Proposed Enhancements: What’s Coming

On November 25, 2024, the Financial Services and Treasury Bureau issued a comprehensive consultation paper outlining significant enhancements to Hong Kong’s preferential tax regimes, including the FIHV tax concession. The consultation period closed on January 3, 2025, with implementation expected in 2025.

Expansion of Qualifying Investments

The proposed enhancements significantly expand the scope of qualifying investments to include:

• Interests in non-corporate private entities: Expanding beyond traditional corporate structures
• Direct lending and private credit investments: Recognizing private credit as a growing asset class
• Virtual assets: Incorporating digital assets and cryptocurrencies
• Emission derivatives and allowances: Accommodating ESG investment strategies
• Insurance-linked securities: Expanding access to alternative risk transfer instruments

Refinement of Incidental Transaction Framework

The consultation paper proposes refining the scope of income eligible for tax exemption by removing the restrictive 5% incidental transaction threshold and introducing an exclusion list approach. This modification would provide greater operational flexibility and reduce compliance complexity.

Hong Kong vs. Singapore: The Family Office Showdown

Hong Kong and Singapore represent Asia’s two preeminent family office hubs, each with distinct advantages. Understanding these differences is essential for families making jurisdiction decisions.

Strategic Considerations: Not Either/Or, But How to Use Both

For sophisticated family offices, the strategic question is not “which jurisdiction wins?” but rather how to intelligently utilize both centers given their different tax regimes, substance rules, and virtual asset frameworks. Many leading families are adopting multi-jurisdictional strategies, establishing presence in both Hong Kong and Singapore to optimize tax efficiency, diversify regulatory risk, and access the distinct capabilities each jurisdiction provides.

Implementation Roadmap: 5 Steps to FIHV Success

1. Strategic Assessment and Structure Design: Evaluate family objectives, existing assets, and whether HK$240 million AUM threshold can be met. Design appropriate entity structures (trust, company, or partnership) based on succession planning goals.
2. Establishment of the Single Family Office: Incorporate the SFO entity, recruit at least two full-time qualified employees in Hong Kong, establish office premises, and implement governance frameworks.
3. FIHV Formation and Compliance Framework: Establish the FIHV entity, ensure family ownership meets requirements, document management and control arrangements, and implement procedures to track qualifying transactions.
4. Operational Commencement and Tax Filing: Commence investment activities through the SFO, maintain detailed records, monitor compliance with thresholds, and file profits tax returns with appropriate self-declaration.
5. Ongoing Compliance and Optimization: Annual monitoring of AUM, regular review of family ownership percentages, periodic assessment of employee qualifications, and monitoring of regulatory developments.

Complementary Initiatives: Capital Investment Entrant Scheme

Beyond the FIHV tax regime, Hong Kong’s Capital Investment Entrant Scheme (CIES), relaunched in March 2024, provides an additional incentive for family principals to establish residency. The CIES requires a minimum investment of HK$27 million in qualifying assets (including HK$3 million into a CIES Investment Portfolio) to qualify for residency rights. The scheme received over 5,000 inquiries and more than 500 applications in its first months of operation.

Government Support and Ecosystem Development

Hong Kong’s government has implemented a comprehensive policy framework to support family office establishment and growth, including:

• InvestHK FamilyOfficeHK Team: Dedicated government support team that has assisted nearly 60 family offices in establishing or expanding operations
• Network of Family Office Service Providers: Platform connecting professional service providers offering specialized family office services
• Philanthropy Initiative: Repository platform for charity projects to assist family offices in wealth legacy planning
• Target of 200 Family Offices: Government objective to facilitate at least 200 family offices establishing or expanding operations in Hong Kong by end of 2025

Hong Kong’s Family Investment Holding Vehicle regime represents a strategic masterstroke in positioning the city as Asia’s premier family office hub. The combination of complete tax exemption, streamlined compliance, structural flexibility, and absence of local investment mandates creates an unparalleled proposition for ultra-high-net-worth families. With progressive enhancements on the horizon and robust government support infrastructure, Hong Kong is not just competing in the family office space—it’s redefining the rules of the game. For families seeking efficient wealth preservation and multi-generational planning, the time to explore Hong Kong’s FIHV opportunities is now.